Tokenised Real-World Assets: How Blockchain Is Bringing Property, Bonds and Stocks On-Chain

Real-world asset tokenisation — the process of representing ownership of physical or financial assets as tokens on a blockchain — has moved from niche experiment to mainstream financial product faster than almost any previous blockchain application. In 2026, BlackRock’s tokenised US Treasury fund (BUIDL) holds over two billion US dollars in assets. JPMorgan’s Onyx platform settles over one billion US dollars in tokenised collateral transactions daily. The Bank of England has participated in Project Meridian, a proof-of-concept for settling tokenised gilt transactions using shared digital infrastructure. For UK investors who have followed the crypto markets through NFTs and DeFi, real-world asset tokenisation is a fundamentally different proposition: it brings regulated, income-producing financial assets onto blockchain infrastructure. This guide explains what tokenisation is, how it works technically, which assets are being tokenised, the risks involved, and how HMRC treats tokenised assets for UK tax purposes.

What Is Real-World Asset Tokenisation?

Tokenisation is the process of creating a digital token on a blockchain that represents a legal claim on a real-world asset. The token does not replace the underlying asset — it represents an enforceable interest in it. The underlying asset might be a US Treasury bill, a UK government gilt, a commercial property, a share in a private equity fund, a commodity such as gold, or a corporate bond. A smart contract on the blockchain governs the rules of the token: who can hold it, how it can be transferred, and how any income generated by the underlying asset — interest payments, rent, dividends — is automatically distributed to token holders.

The fundamental appeal of tokenisation is that it can make previously illiquid assets fractional, transferable 24 hours a day, and composable within decentralised finance protocols. A £10 million commercial property in Birmingham that might previously have been accessible only to institutional investors with large minimum commitments could, in theory, be tokenised into one million tokens worth £10 each, allowing retail investors to own a fractional share and receive proportional rental income distributed automatically through a smart contract.

Which Assets Are Being Tokenised?

The most actively tokenised asset class in 2026 is US Treasury securities — short-dated government bonds considered the safest financial instruments available. BlackRock’s BUIDL fund, launched on the Ethereum blockchain in March 2024, holds short-dated US Treasuries and pays daily dividends to token holders. Ondo Finance, Franklin Templeton, and WisdomTree all operate similar tokenised Treasury products. As of early 2026, the total market capitalisation of tokenised US Treasuries exceeded four billion US dollars globally — a category that barely existed two years earlier.

UK gilts — British government bonds — are increasingly being explored as tokenisation candidates. Project Meridian, a collaboration between the Bank of England, the Bank for International Settlements Innovation Hub, and technology partners, tested the technical feasibility of settling gilt transactions using tokenised representations on a distributed ledger platform. The UK’s Digital Securities Sandbox, launched jointly by the FCA and Bank of England in 2024, allows firms to test tokenisation of regulated financial instruments including bonds and equities under regulatory supervision.

Tokenised commodities are also growing in scale and variety. PAXG tokens, each representing one troy ounce of gold stored in Brink’s secure vaults in London, can be traded around the clock on crypto exchanges and within DeFi lending protocols. Over 300,000 troy ounces of gold were represented by PAXG tokens in circulation in late 2025. UK physical property tokenisation projects are at an earlier stage, with several pilot programmes underway involving residential buy-to-let properties and student accommodation assets.

How Tokenisation Works Technically

Creating a tokenised asset involves several distinct components working together. A legal wrapper establishes the token holder’s actual ownership rights. This is typically a special purpose vehicle (SPV), a trust structure, or a regulated fund that holds the underlying asset and issues tokens as fractional claims against it. Without a proper legal structure, a token is simply a digital receipt with no enforceable backing — a distinction that matters enormously for investor protection.

A smart contract on the blockchain — most commonly Ethereum, Polygon, or purpose-built distributed ledger systems — governs the token’s behaviour. The smart contract holds the rules for token issuance, transfer restrictions, and redemption. For regulated assets, the smart contract incorporates identity verification (KYC and AML) logic that restricts transfers only to addresses that have completed the required identity checks. This is how tokenised financial products can comply with anti-money laundering regulations while still being transferable on a public blockchain.

An oracle — a data feed that connects the blockchain to off-chain information — provides the smart contract with real-time data such as current Treasury yields, interest rates, or property valuations needed to calculate and distribute income to token holders accurately. Chainlink is the most widely used oracle network for tokenised assets in 2026. Custody of the underlying asset must also be managed by a regulated custodian holding the physical bond, property title, or commodity bar off-chain while the blockchain records token ownership on-chain.

The Risks of Tokenised Assets

Tokenised real-world assets are not without significant risks that UK investors must understand before participating. These risks are distinct from the risks of conventional crypto assets like Bitcoin and Ethereum, but they are real and material.

Smart contract risk is the most immediate technical risk. The smart contract governing a tokenised asset is a piece of software, and software can contain bugs. The Nomad Bridge hack in August 2022 drained approximately 190 million US dollars from a cross-chain protocol in under two hours because of a single smart contract vulnerability. Audited smart contracts from reputable security firms significantly reduce but do not eliminate this risk. UK investors should check whether any tokenised product they consider has undergone a formal security audit by a recognised firm.

Counterparty and legal risk is equally important. The value of a tokenised asset depends entirely on the legal enforceability of the token holder’s claim. If the issuer of a tokenised property token goes insolvent, or if the jurisdiction in which the SPV is registered changes its laws, token holders may find their claims difficult to enforce. UK investors should prioritise tokenised products issued through structures regulated under English and Welsh law or a recognised offshore legal framework with strong investor protection history.

Liquidity risk is a significant concern for tokenised assets not traded on major regulated exchanges. Unlike a UK gilt ETF that trades millions of times daily on the London Stock Exchange, a tokenised commercial property or private equity token may have very thin secondary market trading. Selling a tokenised asset at a fair price may be difficult if no buyer is available at the time the investor wishes to exit. Unlike regulated collective investment schemes, there may be no obligation on the issuer to provide a redemption facility.

Regulatory risk — the possibility that the FCA or HMRC reclassifies certain tokenised assets, requiring additional compliance steps or changing the tax treatment — remains live and evolving. The Digital Securities Sandbox is specifically designed to address regulatory uncertainty by providing a controlled environment where firms can operate provisional authorisations while frameworks are developed.

What HMRC Says About Tokenised Assets

HMRC has not published specific guidance on tokenised real-world assets as of mid-2026, but its general cryptoasset taxation principles apply. HMRC treats most cryptoassets as capital assets for tax purposes. Disposals — including selling a token, exchanging it for another asset, or redeeming it for the underlying asset value — trigger a capital gains tax event. UK capital gains tax on cryptoasset gains applies at 18 per cent for basic rate taxpayers and 24 per cent for higher rate and additional rate taxpayers on gains exceeding the £3,000 annual CGT allowance (which was reduced from £6,000 in April 2024).

Income generated by tokenised assets — such as interest distributions from a tokenised Treasury fund or rental income from a tokenised property — is likely to be treated as income tax rather than capital gains. The applicable income tax rate depends on the investor’s total income in the tax year. HMRC’s guidance on whether a tokenised asset is treated as a standard cryptoasset or as a recognised investment such as a security token is expected to develop as the Digital Securities Sandbox produces regulated products and firms seek HMRC clearance on their structures.

UK investors in tokenised assets should keep detailed records of every acquisition, disposal, and income receipt — including the date, the sterling value on that date, and the nature of the transaction. HMRC can and does investigate cryptoasset portfolios using data obtained from UK-registered exchanges. Consulting a tax adviser familiar with HMRC’s cryptoasset guidance before investing in tokenised products is strongly recommended for any material position.

What This Means for UK Investors

Real-world asset tokenisation is one of the genuinely novel applications of blockchain technology with clear mainstream financial utility and growing institutional participation. For UK investors who have been sceptical of purely speculative cryptocurrencies, tokenised versions of established financial instruments — government bonds, investment-grade corporate debt, physical gold — offer blockchain exposure backed by familiar underlying assets with established income streams.

The primary near-term opportunity for retail UK investors is likely to be tokenised money market instruments: short-duration, low-risk products that provide access to institutional-grade Treasury yields in fractional sizes with daily liquidity. As the FCA’s Digital Securities Sandbox produces FCA-authorised products and secondary market infrastructure develops, direct access to tokenised bonds and property funds at retail-friendly minimum investments is expected to expand significantly between 2026 and 2030.

The risks are real — particularly around legal enforceability, smart contract security, and liquidity — and require careful due diligence that most retail investors are not currently equipped to perform independently. UK investors should prioritise tokenised products issued by FCA-regulated entities, with audited smart contracts, transparent custody arrangements for the underlying assets, and clear documentation of the legal rights attached to the token.

This article is for educational purposes only and does not constitute financial advice. Cryptocurrency and tokenised asset investments involve significant risk. Always do your own research before investing.